A Biden Win May Be Bad News for Thai and Indonesian Bonds

A victory by U.S. presidential candidate Joe Biden in next month’s election could push up Treasury yields, according to some analysts. In Southeast Asia, that may be especially bad news for holders of Thai and Indonesian bonds.

A study by Bloomberg of six emerging Asian debt markets shows those two countries are among the most vulnerable to yield moves in the world’s biggest economy, ranking only behind South Korea as the most responsive. A major reason behind the heightened sensitivity of South Korean and Thai bonds is the nations’ relatively high dependence on trade, open capital accounts, and narrow yield spreads over Treasuries.

A Democratic clean sweep of the Presidency and both houses of Congress mayjolt U.S. Treasury 10-year yields higher 30 to 40 basis points over the following month, Goldman Sachs Group Inc. said in a research note last week. That would reflect the possibility of substantially higher federal spending, the bank said.

South Korea’s bonds have shown the most consistent moves in response to those in similar-maturity Treasuries, shifting an average 24 basis points versus a mean 43 basis-point swing in the U.S., or a ratio of 0.56, based on the Bloomberg study. Thailand’s 10-year yields have a ratio of 0.45, and Indonesia’s stands at 0.81, the analysis found.

10-year bonds


Average move/standard

deviation of all moves (ratio)


Average move versus 1 basis point

move in Treasuries (basis points)

South Korea2.640.56

At the other end of the spectrum, China’s debt has been the least sensitive, with a ratio of just 0.02. The lack of responsiveness appears due to the nation’s relatively low dependence on trade as a percent of gross domestic product, and the subdued level of foreign ownership of its bonds. This dynamic could change moving forward, due to risingoverseas participation in the country’s debt market and its recentinclusion in the FTSE Russell benchmark bond index.

China, though, is definitely an outlier. The relatively high level of sensitivity to U.S. Treasuries through the rest of the region means the outcome of the Nov. 3 election may end up being just as important in Asia as it is to U.S. investors.

To view the full methodology, clickhere.

What to Watch

  • Thailand will release inflation data on Monday, with economists predicting the report will show a seventh straight month of deflation
  • Indonesia will hold aconventional bond auction on Tuesday
  • The Philippines will announce CPI data on Tuesday and trade numbers on Friday

Note: Marcus Wong is an EM macro strategist who writes for Bloomberg. The observations he makes are his own and not intended as investment advice.

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